Is President Obama's Depression Coming Our Way?

Jim Powell
, ContributorI cover economic and political history.Opinions expressed by Forbes Contributors are their own.

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Barack Obama began his presidency talking about a “New New Deal,” referring of course to his hero Franklin Delano Roosevelt’s policies during the Great Depression. Those policies had the unintended effect of prolonging double-digit unemployment, principally by making it more expensive and difficult for employers to hire people. Whenever something becomes more expensive and difficult, there’s likely to be less of it. In this case, private sector jobs.

Now Obama is presiding over the worst economic recovery since the Great Depression, and if he’s elected for another term, this official “recovery” – with incomes falling faster than during the 2008-2009 recession – could turn into a crushing depression.

In all likelihood, we have already seen what a second Obama term would be like. He wouldn’t need to be concerned about the unpopularity of his policies, since – if the Constitution is upheld – this would be his last term. He could pursue his hardcore progressive agenda without electoral consequences.

Obama seemed to be free from electoral consequences following the 2008 election, because Democrats controlled both houses of Congress. He reportedly told Republicans: “I won. I don’t have to take your ideas.” As we know, he rapidly increased spending. He increased taxes and approved tax refunds for people who didn’t pay taxes. Debt soared, and costly regulations proliferated. He promoted crony capitalism, compulsory unionism and government-run health care. He got almost everything he wanted.

Obama became accustomed to exercising arbitrary power. After Republicans gained a majority of the House in 2010, he evaded congressional approval of some controversial appointments, intimidated Chief Justice John Roberts into upholding Obamacare and gutted the 1996 welfare reform bill by eliminating the work requirement. He also nixed the Keystone pipeline that would have created thousands of American private sector jobs.

There was even some thuggish behavior. Perhaps frustrated by Republican opposition, Obama reportedly invited House Budget Committee Chairman Paul Ryan to attend an April 2011 speech to be delivered at George Washington. Ryan sat in the front row. Obama denounced Ryan’s approach to the federal budget, and Ryan didn’t have an opportunity to respond. Obama later denied this was a setup to embarrass Ryan, but during his 2010 State of the Union Address, Obama had similarly denounced Supreme Court justices who were in the audience.

In his acceptance speech at the Democratic National Convention, Obama made fun of pro-growth policies like tax cuts and deregulation. “Feel a cold coming on?” he sneered. “Take two tax cuts, roll back some regulations, and call us in the morning.”

Yet these pro-growth policies have been associated with the most successful American economic recoveries of the past century, during the 1920s, the 1960s and the 1980s. Ronald Reagan faced a worse economy than Obama did, because there was double-digit unemployment, double-digit inflation, double-digit mortgage rates and chronic shortages that disrupted businesses and consumers alike. After Reagan cut taxes and streamlined regulations, the result was annual economic growth rates up to 8 percent, quadruple Obama’s record now.

Obama has relentlessly promoted runaway spending and denounced those who want to bring it under control. In particular, Obama has avoided efforts to reform the giant entitlements that account for more than half of all federal spending and, if they aren’t reformed, could eventually squeeze everything else out of the budget.

It’s no secret that Medicare and Social Security, for instance, face insolvency. There are two principal reasons.